Lords amendment: No. 1 in page 1, line 20, at end insert
or rights to subscribe for any such securities
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§ The Parliamentary Under-Secretary of State for Health (Mrs. Edwina Currie)
I beg to move, That this House doth agree with the Lords in the said amendment.
I shall do my best to pick my way through the forest of amendments. I put on record our appreciation of the detailed revision work on the Bill carried out in the other place.
The first group of amendments refers to clause 1 which refers to the General Practice Finance Corporation. Clauses 1 to 6 provide for the abolition of the GPFC as presently constituted, and for its property, rights and 844 liabilities to be transferred to a company incorporated under the Companies Act 1985, which I shall call the successor company.
In reply to the question why we should do that, I would refer to the original context and role of the GPFC and how that has changed during the past 20 years. As independent contractors, general medical practitioners are responsible for providing surgery premises. Back in the 1960s some doctors found it difficult to raise the capital required so that GPFC was set up under the 1966 Act with powers to make long-term loans to doctors for the purposes of acquiring or improving practice premises. Those powers were extended by the Health Services Act 1980 to include the acquisition and leaseback of premises.
The lending scheme operated by the corporation allows loans up to 100 per cent. of the cost or valuation of surgeries over a term of up to 20 years at fixed or variable rates of interest. Before making a loan, the GPFC must be satisfied that the premises have been approved by the local family practitioner committee and will be used regularly and substantially for the provision of general medical services under the NHS.
The GPFC is a non-profit making and entirely self-supporting organisation. It charges all borrowers a rate of interest sufficient to cover its own borrowing and administrative costs. It obtains funds by temporary borrowing and by issuing stock under Treasury guarantee, all of which to date—£125 million—has been taken up by the National Investment and Loans Office. The GPFC's borrowing net of repayments to NILO is classified as public expenditure and as a result contributes to the PSBR, hence our interest in removing it from that consideration. We feel that such a financial service was thought necessary in 1966, but, given that such financing is a well-established private sector activity, we need to ask why we need to make special provision for it in the public sector in respect of family doctors. I believe that the answer is that we do not.
Plenty of GPs already raise funds for their practice premises from other financial institutions. On various occasions they have been proud to show off those premises to me, and there is no reason to believe that they would be less likely to use the GPFC if it were privately owned.
Funds are readily available and there is healthy competition among lenders. In such circumstances, it makes obvious sense to concentrate our public resources on those things which only the public sector can do. In transferring the corporation to private ownership, we shall be giving a major reputable financial institution the opportunity to acquire the GPFC. We shall not be giving it away; we shall acquire some money for it and we expect that institution to administer it in the interest of doctors and patients.
As well as commanding the confidence of private sector investors, we wish to retain the interest and involvement of our family doctors. To that end we are undertaking discussions with their representatives and with the corporation about how best that might be achieved. We certainly hope and expect to see family doctors on the board of the new company so that they can contribute their knowledge and experience to the management of its affairs. We are also seeking powers to influence the content of the memorandum and articles of association so as to safeguard the main objectives of the present corporation through the successor body. We are also increasing the corporation's current borrowing powers from £150 million 845 to £160 million to ensure that it remains actively in business pending the conclusion of the new arrangements that we propose.
The four amendments to clause 1 are important but essentially technical. They are designed to smooth the passage of the GPFC into the private sector. Amendments Nos 36 and 37 to clause 23 refer to the date when the GPFC clauses start to operate on Royal Assent.
I shall now turn to the individual amendments. Clause 1(3) enables the Secretary of State, with the consent of the Treasury, to acquire, hold and dispose of stocks, shares and other securities of the successor company. It does not refer to the rights to subscribe to securities. In other words, it does not cover rights issues. Lords amendment No. 1 seeks to ensure that it does so. It is precedented in section 52(1)(b) of the Gas Act 1986.
Clause 1(12) provides that any sums received under paragraphs (a) and (b) of it shall be paid into the consolidated fund. However, it may be necessary for the Secretary of State to discharge the liabilities either of the corporation or of the successor company and pay the balance into the consolidated fund.
Lords amendment No. 2 and Lords amendment No. 3, which is consequential upon 2, admit payments elsewhere. Lords amendment No. 4 is a technical amendment referring to a new schedule to the Bill which is Lords amendment No. 44. The purpose of the additional schedule to the Bill is twofold and I have no doubt that Opposition Members will welcome it. First, it ensures that any agreement made by the GPFC will have effect after vesting day as if made by the successor company. In particular, we wish to ensure that where the GPFC is a lessee subletting to doctors any covenant restricting assignment shall not prevent the substitution of the successor company as lessee in place of the GPFC.
Secondly, we wish to ensure that the transfer on vesting day will not operate so as to terminate the contract of any person employed in the GPFC and that the terms of the contract will not be varied in any way apart from substituting the successor company as the employer.
§ Mrs. Currie
The hon. Member for Peckham (Ms. Harman) says, "Good". It is nice to have some non-partisan support for what we are doing.
Both those objectives are secured by the amendment. I ask the House to support these technical amendments.
§ Mr. Ronnie Fearn (Southport)
In subsection (2), consequential on (1), which was mentioned, will the Minister explain what the consolidated fund is at the moment?
§ Mrs. Currie
Will the hon. Gentleman extend his question so that I can give it the due care and consideration which it obviously requires? Will he explain to me at a little more length exactly what he is talking about?
§ Mrs. Currie
I am very grateful to the hon. Gentleman for raising this most important point. As the Bill stands, clause 1(12) provides that any sums received by the Secretary of State under paragraphs (a) and (b) in connection with the reconstitution of the GPFC must be paid into the consolidated fund, which is, as I am sure the hon. Gentleman knows, the account into which all public money due to the Exchequer is usually paid. That is because it was envisaged that the GPFC's indebtedness to NILO would be repaid by the purchaser and not by the Secretary of State. The National Loans Act 1968 provides that all money raised by the creation of debt is payable into the national loans fund together with receipts representing repayments of loans made from the fund or, before that Act came into effect, charged directly on the consolidated fund, and interest on those loans. The national loans fund is the channel through which all the Government's borrowing transactions, and most domestic lending transactions, pass. It is still likely that the purchaser will repay the NILO debt directly, but there could be a premium payable for premature redemption which reflects the difference between the prevailing gilt redemption yields. I am sure that the hon. Gentleman is following carefully. That will be only on fixed rate stocks—variable rate stocks will, as I am sure the hon. Gentleman knows, be repaid at par value.
The Secretary of State might have to pay the premium from the proceeds of sale, and it would go to NILO. It is against such an eventuality that we are taking powers to enable him to pay moneys into other than the consolidated fund. It is necessary that he should be able to discharge liabilities either of the corporation or of the successor company and pay the balance into the fund. I hope that that has answered the hon. Gentleman's question.
§ Mr. Deputy Speaker (Mr. Harold Walker)
Order. The hon. Gentleman can speak only once in a debate on a Lords amendment.
§ Question put and agreed to. [Special entry.]
§ Lords amendments Nos. 2 to 4 agreed to. [Special entry.]